EU Trading Relationship

[Sir Jeremy Wright in the Chair]

I beg to move,

That this House has considered the trading relationship with the EU.

I declare an interest as the chair of the UK Trade and Business Commission. I am grateful to the Backbench Business Committee for granting this debate, and to colleagues on both sides of the House who supported the application.

It has never been so timely to talk trade, but before we look forward, we need to look back at how we arrived here. It has been 4,744 days since Prime Minister David Cameron promised the country a referendum on our future relationship with the European Union: in his words, a

“simple in or out choice”.

Ever since, the UK’s relationship with the European Union has been anything but simple.

In the decade that followed Cameron’s speech, successive Conservative Governments did everything in their power to distance the UK from our largest trading partner. In 2020, the trade and co-operation agreement was signed with an ideological zeal to diverge as much as possible from the EU. Agreed by the Conservatives and cheered on by Reform, it is a choice that we are all paying for. According to the Office for Budget Responsibility, the barriers to trade that were put up by leaving the EU have set the UK economy on course to lose more than £100 billion over the medium term. The London School of Economics has found that the increased barriers to trade have left the average person paying £250 more every year on their food shop.

Repairing the UK’s trading relationship with the EU is all the more important given the dramatic change in the position of the United States. Our Government deserve praise for their calm and measured response to tariffs, but none of us can presume to know what the position of the White House will be in six days, let alone in six months. By contrast, it is certain that the EU will remain the UK’s largest trading partner. The EU accounts for 42% of UK exports and 52% of imports. That is our most essential trading partnership.

I welcome all that the Labour Government have done in our first nine months to begin to repair and reset that relationship. Ours was the first Chancellor to attend a Eurogroup meeting since Brexit, and the Prime Minister has been in lockstep with fellow European leaders in shared support of Ukraine. The leadership of the Prime Minister and the Chancellor has established the opportunity for a substantive change in UK-EU relations, but it is vital that we seize that opportunity. I want to see the most ambitious trading deal possible and will focus my remarks on three points: first, the importance of a deal that includes mutual recognition of conformity assessments; secondly, the case for deep alignment between the UK and EU on goods and services; and thirdly, a bespoke visa-based youth mobility deal.

One of the failings of the trade and co-operation agreement was the lack of a mutual recognition agreement on conformity assessments, which are used to determine whether a product meets a country’s regulations for goods and to ensure safety, performance and compliance with legislative requirements. Conformity markings include the UK conformity assessed mark and the EU’s CE mark. With a mutual recognition agreement, countries that recognise each other’s conformity assessment bodies and procedures avoid duplication of testing and certification for goods. Without such an agreement, products made in the UK and intended for the EU cannot be tested here, and vice versa. The EU has conformity assessment MRAs in place with countries including Switzerland, Australia, New Zealand, Japan and Canada. The UK has them with the USA, Switzerland, Canada, Australia and New Zealand. Last month, a coalition of 19 business groups, including the Confederation of British Industry, Make UK and techUK, called for a UK-EU mutual recognition agreement and said that it would support export-led growth, particularly for small and medium-sized enterprises. I look forward to hearing the practical steps that the Minister is taking to help make that a reality.

My second point is about alignment with the EU on goods and services. When the Conservatives signed the TCA, the winners were the ideologues who advocated for the UK to become a version of Singapore-on-Thames. The losers were our businesses, especially those exporting goods. The last Government made an active choice to diverge from European Union regulations and standards. If we listen to business, it does not take long to see the impact. The British Chambers of Commerce surveyed its members on how they had been affected by the TCA: they listed challenges for business from red tape, bureaucracy, paperwork and delays in goods flowing through customs. Recently, the Chartered Institute of Export and International Trade has found that that has caused a staggering 2 billion extra pieces of paperwork for businesses since we left the EU.

Part of the answer must now come from closer alignment on goods and services once again. Earlier this year, Best for Britain commissioned Frontier Economics to model a scenario with

“an expansive approach to mutual recognition, in which the UK and the EU take active steps to minimise regulatory divergence and commit to recognising the equivalence of each other’s regulations.”

At my recent business roundtable in Monmouthshire, I spoke to Tri-Wall, a business that exports to the EU. Instead of sending one lorryload of its goods to different countries all across the EU, it now has to send a different lorry to every country, which really increases its costs. Does my hon. Friend agree that we need closer alignment to avoid that kind of problem?

I agree entirely. I have heard far too many stories exactly like that in communities across the country.

The hon. Gentleman is making a very good point. I have given up days of my life to helping to free up fish exporters from Shetland from red tape, but the truth is that although we have put friction into those exports, the standards are still broadly the same. It would not be that difficult, at this point in history, to get the necessary alignment, especially through a sanitary and phytosanitary agreement, for example. We are looking at a market that is important to us and in which we have similar standards—unlike across the Atlantic, where there are very different standards for food products.

I defer to the right hon. Member’s expertise on the fishing sector, but he is absolutely right about the need for an SPS deal. I am proud that that was in the Labour manifesto on which I was elected and that we are actively seeking to pursue it.

According to the important work commissioned by Best for Britain, if we get a deep alignment, the modelled impact is a boost in UK GDP of 1% to 1.5%. If in parallel we pursue deep alignment in the services sector, the combined benefit could be more than 2% of UK GDP. To put that in context, every 1% of UK GDP is worth approximately £26 billion, so the potential prize is a £50 billion boost to the economy.

Finally, on youth mobility, hon. Members may have seen that 70 Labour parliamentarians put their names to a letter yesterday calling for a new, bespoke youth visa scheme for UK and EU citizens under 30. As with all the UK’s existing schemes, we believe that it should be time-limited and subject to a cap on numbers, but a bespoke scheme would extend new cultural, educational and economic opportunities to young people in the UK and the European Union.

My hon. Friend is making a fantastic speech. I declare an interest as a UK citizen under 30. Does he agree that the upcoming EU-UK summit on 19 May provides an ideal opportunity for the Government to look at proposals such as a youth mobility scheme, which would surely provide a better opportunity for young people in the United Kingdom to explore, learn and find opportunities across borders?

I agree entirely with my hon. Friend and remain jealous of both his wisdom and his youth.

For a clear majority of people in this country, extending opportunities for young people matters. It is a move that will unlock further opportunities for trade and co-operation and will strengthen our bonds with the European Union in future. It is also vital to underline why it is materially different from freedom of movement. Under a visa scheme, people will have to apply in advance, numbers can and will be monitored, and any deal will follow a similar shape to the ones that this country already has in place with countries such as Australia, Canada and even Uruguay.

After so much damage done by the Conservatives, the Government deserve huge credit for all that they have done to repair relations with the European Union. It is our largest and most important trading relationship and so much is at stake. I hope that we can be as ambitious as possible for the reset. I look forward to hearing from colleagues and from the Minister.

Order. It will not have escaped anybody’s notice that this is a popular debate, so I remind all Members to continue to stand if they want to be called. The debate can run no later than 4.55 pm, which gives you about two and a half minutes each. I ask you to exercise some discipline, and we will get in as many Members as we can.

It is a pleasure to serve under your chairmanship, Sir Jeremy. It is good to see how popular this debate is with colleagues. I congratulate the hon. Member for Welwyn Hatfield (Andrew Lewin) on securing it.

Leaving the EU has been devastating for our economy. A hard Tory Brexit, which unfortunately this Government have embraced, continues to be devastating for the economy. The economic impact, particularly for SMEs, is something that they continue to live with from day to day, and so is the impact of the withdrawal of freedom of movement on our food and drink industry, care services and the NHS. In fairness, Scottish Labour, of which the Minister is a member, has embraced the issue by talking about decentralising and a potential migration system for Scotland; I hope that the Minister will be able to support my Bill on that subject tomorrow. We have also seen an impact on security. Every other country in western Europe considers the EU and NATO twin pillars of their security in the aftermath of Russia’s aggression.

More than that, as the hon. Member for Welwyn Hatfield says, there has been an impact on all our rights, and particularly those of young people. This political generation is leaving behind fewer rights than we enjoyed ourselves. My sympathies go to the hon. Member for Hertford and Stortford (Josh Dean), who is under 30, because he enjoys fewer rights than the hon. Member for Welwyn Hatfield and I did.

The hon. Member for Welwyn Hatfield talks about a cap. A cap on whom? Which young people do not get the opportunities that he himself had and that the Minister had? We should all feel deeply ashamed and deeply uncomfortable.

It does not have to be like this. As The Economist has said, we could rejoin the customs union, giving the Exchequer an immediate boost very rapidly. We could rejoin the single market. Even pursuing the trade deal promised by the Conservatives—there are precious few of them here today to defend their deal—would see 0.4%, after a 4% hit to the economy.

I congratulate my hon. Friend the Member for Welwyn Hatfield (Andrew Lewin) on securing this debate, on his superb speech and on the impact that he has made in this House.

We are all history’s witnesses to a radical reshaping of the western alliance. Yesterday, the United States Treasury Secretary said:

“‘America First’ does not mean America alone.”

But if we look beyond the rhetoric to the reality, it is very clear that what Churchill called the sinews of peace are now under tremendous strain. America is now exiting the multilateral alliances that it created under Presidents Roosevelt, Truman and Eisenhower between 1944 and 1960. What some have called Amexit must now force us to rethink Brexit. We have to look again at resetting our alliance with our closest neighbour.

I draw the House’s attention to the draft Green Paper that we think the Government should have published: the report published by the Business and Trade Committee on 4 April, which sets out 20 ways in which we think we can reset our relationship with our closest neighbour, spanning defence, regulation, energy co-operation, services and innovation. There are 20 measures across that space that could give us as big an economic boost as is needed to offset the cut from tariffs. They include an EU-UK defence pact, a shared industrial policy, a joint plan to defend critical national infrastructure and deeper co-operation to defend ourselves against economic threats; an ambitious sanitary and phytosanitary agreement, the mutual recognition of customs schemes and of conformity assessments, streamlining customs declarations at the border, enhancing co-operation at our ports and rejoining the pan-Euro-Mediterranean convention; and making sure that we have long-term regulatory road maps to maximise the alignment between sectors in our economy and in the EU. We found that there is widespread support for that across the business community in the UK, and in the European Union too.

It is a pleasure to serve under your chairship, Sir Jeremy, and I thank the hon. Member for Welwyn Hatfield (Andrew Lewin) for securing this important debate ahead of the UK-EU summit next month. The summit comes in the throes of alarming uncertainty created by President Trump’s dangerous, chaotic and authoritarian approach to trade and international relations. The Trump turmoil makes building close relationships with our EU neighbours even more urgent. We need to fix those relationships because the UK’s withdrawal from the EU has caused profound damage to our relationship with our nearest and biggest trading partner. I will not repeat the stats that Members have already highlighted, but I want to highlight that smaller firms are seeing the biggest fall in trade. I know that Brexit has caused major problems for independent local businesses in my Bristol Central constituency.

The hon. Member is making an extremely powerful speech. On SMEs, does she recognise that the defence industry in Bristol suffers from the inability to receive adequate funding from across Europe, and that a defence, security and industrial bank underwritten by the UK, alongside its European partners, would be able to unlock the investment that Bristolian businesses vitally need?

Order. Ideally, the hon. Gentleman would not sit there because there is no microphone and we are not picking him up. I am sure the hon. Lady heard him and can respond.